Canadian DB plans post median 2.5% return in Q2

Canadian defined benefit plans posted a median return of 2.5 per cent during the second quarter of 2019, according to data by Northern Trust Corp.

The small gain marked the second consecutive quarter of positive growth, despite global growth concerns and worries over ongoing trade disputes contributing to equity volatility in developed markets.

“In the midst of uncertainty surrounding trade policies coupled with a mixed economic climate, Canadian pension plans continue to generate positive investment returns in the second quarter of 2019,” said Arti Sharma, president and chief executive officer of Northern Trust Canada, in a press release. “Year-to-date, the median return is positioned at 9.9 per cent versus 2.9 per cent the same time last year.”

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During the quarter, domestic equities rose by 2.6 per cent, measured by the S&P/TSX composite index. Information technology led the gains, while six other sectors also posted positive returns. Health care dragged returns down as cannabis companies saw pullback after their impressive gains in 2019’s first quarter.

In the U.S., strong gross domestic product growth pushed stocks higher with solid consumer spending, as well as the expectation of the U.S. Federal Reserve cutting interest rates down the road contributing positively to sentiment in the market, noted the release. Overall, the S&P 500 returned 4.3 per cent in U.S. dollar terms, but just two per cent in Canadian dollars.

Overseas, the MSCI EAFE index, which represents large and mid-cap securities across 21 developed markets in Australasia, Europe and the Far East, saw a 1.7 per cent return in Canadian dollar terms, muted somewhat by trade tensions and slower global growth creeping into the performance of export-oriented economies like Europe and Japan.

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Emerging market stocks were the laggards of the quarter, with the MSCI emerging market index posting negative 1.5 per cent in Canadian dollar terms for the quarter, with stocks in the Chinese information technology sector hit especially hard.

Domestic bonds came close to returns equivalent to their equity counterparts. The FTSE Canada universe index returned 2.5 per cent, with long-term bonds outperforming short- and mid-term ones.